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Hindustan Engineering & Industries Limited (Prior to Merger Known as Malanpur Steel Limited) v/s Spicejet Limited & Others

    CO.APP. No. 2 of 2018

    Decided On, 29 March 2022

    At, High Court of Delhi

    By, THE HONOURABLE MR. JUSTICE SURESH KUMAR KAIT & THE HONOURABLE MR. JUSTICE SUDHIR KUMAR JAIN

    For the Appellant: Jayant Mehta, Senior Advocate, Shantanu Ghosh, Raghuvender Ghose, Advocates. For the Respondents: R1, Atul Sharma, Abhinav Sharma, Ashutosh Ranjan, Advocates, R2 to R4, Arvind Nigam, Senior Advocate, Manmeet Arora, Tarang Gupta, Keshav Sehgal, S. Kalra, Advocates.



Judgment Text

CM APPLN. 5824/2022 (Under Rule 9 of Companies (Court) Rules, 1959)

1. By this application, applicant/respondent No. 2 to 4 are seeking permission to sell 12,45,300 shares of respondent No.1 at the prevailing market rate, which are in the custody of respondent No. 2 in dematerialized form.

2. Learned senior counsel for applicants/ respondents No.2 to 4 submitted that vide order dated 05.03.2018, this Court had permitted sale of 52,92,500 shares, inclusive of 12,45,300 shares, at the rate of Rs.118.25 per share and to deposit the sale proceeds in the “no lien account”, which was to be further converted into Fixed Deposit receipts and deposited with the Registrar General of this Court. However, since 12,45,300 shares were dematerialized by respondent No.1 belatedly only on 24.01.2020 and thereafter, in the light of Covid-19 pandemic, the share price of respondent No.1 drastically fell, so the sale of these shares in terms of undertaking furnished before the Court on 05.03.2018 at the reduced price is onerous, and, therefore, sale could not be affected.

3. It was further submitted by learned senior counsel for the applicants that respondent No.1-company is under liquidation and appeal preferred by respondent No.1 is pending adjudication before the Hon’ble Supreme Court. Learned senior counsel strenuously submitted that the share price of respondent No.1 is volatile and is expected to fell even more drastically and if winding up of respondent No.1 is permitted by the Hon’ble Supreme Court, the asset value of the shares would be negligible. Thus, permission of the Court is sought to sell 12,45,300 shares at the prevailing market value; sale proceeds thereof shall be deposited in a “no lien account” and converted into an FDR and deposited with the Court. Lastly, it was submitted that if the applicants are not permitted to sell these shares at the prevailing market rate, then respondent No.2 shall suffer a huge loss.

4. On the other hand, learned senior counsel appearing on behalf of appellant submitted that by virtue of this application, applicants/ respondents No.2 to 4 are seeking review of order dated 05.03.2018, because an appeal against thereof is highly barred by time. It was submitted that this Court after detailed hearing and consideration of submissions advanced by both the sides, had passed the order dated 05.03.2018 while keeping in view the volatility aspect of share pricing and directed sale of 62,92,500 shares, inclusive of 12,45,300 shares and to deposit the sale proceeds with the Registrar General of this Court in the form of FDR.

5. Learned senior counsel for appellant drew attention of this Court to the fact that before passing of order dated 05.03.2018 by this Court, respondents No.2 to 4 under three separate Share Purchase agreements dated 20.01.2018 had sold 52,93,500 shares @ Rs.118.25 per share for a total sale consideration of Rs.52,59,56,375/-, which fact has also been noted in Para-2 of the order dated 05.03.2018. Next submitted that vide order dated 05.03.2018, respondent No.1 was directed de-materialize 40,48,200 and 12,45,300 shares, subject to the respondent Nos.2 to 4 furnishing an indemnity bond indemnifying respondent No.1 against any claim, damage or loss on account of dematerialization and furnishing an undertaking by respondents No.2 to 4 that the entire sale proceeds under the agreement dated 20.01.2018 would be deposited in a “no lien account”, which shall be converted into fixed deposit receipts in the name of respondents No.2 to 4 and deposited with the Registrar General of this Court. Learned senior counsel next submitted that towards sale proceeds of 40,48,200 shares @ Rs. 118.25 each share, on or about 16-05-2018 respondents No.2 to 4 deposited amount of Rs. 47,86,99,650/- in the form of fixed deposit receipts with the Registrar General of this Court but did not deposit the total sale proceed of Rs.62,59,56,375/- towards sale of 52,93,500 shares and thereby, there is shortfall of Rs.14,72,56,725 towards the sale consideration of 12,45,300 shares.

6. Learned senior counsel for appellant submitted that under the share purchase agreement the sale proceeds have already been received by the respondents No. 2 to 4 on 28.01.2018, which fact was suppressed by respondents No.2 to 4 when order dated 05.03.2018 was passed by this Court. It was further submitted that these respondents have deliberately delayed dematerialization of the said shares in terms of order dated 05.03.2018 and did not complete the process even despite extension of time vide order dated 09.12.2019. It was asserted by learned senior counsel that applicants/ respondents No. 2 to 4 cannot be permitted to sell the 12,45,300 shares at the prevailing market rate and instead, they be directed to deposit the sale proceeds of the said shares @118.25 as directed by this Court vide order dated 05.03.2018.

7. In rebuttal, learned senior counsel for applicants/ respondents No.2 to 4 submitted that sale proceeds of 12,45,300 shares @ Rs.118.25 has not been received and encashed by these applicants and since respondent No.1/company is under liquidation and its share price has drastically fallen, these shares be permitted to be sold at the current market value. In addition, it was submitted appellant be directed to furnish security to restitute respondent No. 2 at the prevailing share price of Rs. 61.40/- and compensate it for the loss that would be caused on account of reduction of the share price of respondent No. 1.

8. Upon hearing learned senior counsel representing both the sides and perusal of material on record, this Court finds that when the order dated 05.03.2018 was passed, respondents No.2 to 4 had brought it to the notice of this Court that a share purchase agreement dated 20.01.2018 for sale of 52,92,500 shares @ Rs.118.25 was entered with Motto Investment Private Limited, though price of the share on the said date was 121.75. It was also submitted by applicants/ respondents No.2 to 4 that they were willing and ready to deposit the entire sale proceeds into a “no lien account”. Thereafter, an affidavit dated 13.03.2018 was filed by the Working Director of respondents No. 2 to 4 to this effect and in pursuance thereto, amount of Rs.47,86,99,650/- in the form of fixed deposit receipts was deposited with this Court. Meaning thereby, out of total 52,92,500 shares, 40,48,200 shares were sold @ 118.25 each and the sale proceeds were deposited with the Court. Needless to say that the said deposit is subject to outcome of the present appeal. The controversy raised in the present application pertains to remaining 12,45,300 shares.

9. According to applicants/ respondents No.2 to 4, the remaining 12,45,300 shares could not be sold pursuant to order dated 05.03.2018, as these were belatedly dematerialized only on 24.01.2020. It is not disputed that share price of respondent No.1 has since passing of order dated 05.03.2018 fallen and has gone as below as Rs.61.40/- per share on 31.01.2022 i.e. the date of making this application. There is no doubt, in such circumstances, applicant

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s would not be able to sell remaining 12,45,300 shares @ 118.25 in terms of order dated 05.03.2018. It is also not disputed by both the sides that respondent No.1 is under liquidation and there is likelihood of further falling of its shares price. In these facts, it is impractical to direct respondents No.2 to 4 to sell 12,45,300 shares @118.25. 10. In view of above, the present application is allowed and applicant/ respondents No.2 is permitted to sell 12,45,300 shares of respondent No.1 at the current market rate. Respondent No. 2 shall deposit the sale proceeds realized from the sale of the said 12,45,300 shares in a “no lien account” and convert the same into FDR and deposit with the Registrar General of this Court. 11. The application is accordingly disposed of.
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